IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF OHIO

EASTERN DIVISION

Namon Joseph,

Plaintiff,

v. Case No. 2:11-cv-794

State Farm Fire and Casualty

Company,

Defendant.

OPINION AND ORDER

This is an action brought by plaintiff Namon W. Joseph

asserting claims for breach of contract and bad faith against

defendant State Farm Fire and Casualty Company (“State Farm”). The

claims are based on State Farm’s cancellation of a homeowner’s

policy it had issued to plaintiff and State Farm’s refusal to pay

a claim made by plaintiff after a fire damaged the insured

residence.

On March 5, 2009, plaintiff applied for a State Farm

homeowner’s insurance policy for the residence located at 12377

North Old 3C Highway, Sunbury, Ohio. See Doc. 20, Ex. A, Scott

Hedges Declaration, Ex. 2. Plaintiff made his application by

telephoning the office of State Farm agent Joni Stanton. Policy

Number 35-BL-G460-9 was issued effective March 6, 2009, and was

later extended on March 6, 2010, with an expiration date of March

6, 2011. See Hedges Decl., Ex. 1. On August 18, 2010, a fire

destroyed the residence, and plaintiff filed a claim with State

Farm for the loss. State Farm’s investigation revealed evidence

that the fire, which originated in the basement of the house, was

the result of arson, and that an accelerant was used to start the

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 1 of 27 PAGEID #: <pageID>
fire. During the course of the investigation, plaintiff made

inconsistent statements to State Farm investigators concerning his

whereabouts at the time of the fire and his cell phone coverage. 

State Farm learned that the night before the early-morning fire,

plaintiff had checked into a motel located within a few minutes of

the house. State Farm also learned that certain information

provided by plaintiff for the policy application was false. 

Specifically, State Farm learned that, contrary to the

representations on the policy: 1) plaintiff was not the owner of

the insured residence at the time the policy was issued; 2)

plaintiff had sustained a loss within five years of the issuance of

the State Farm policy when his personal property, located in an

apartment above his restaurant in Coshocton, Ohio, was damaged in

an arson fire in 2006; and 3) Nationwide Insurance had cancelled a

homeowner’s policy on the residence within three years of the

issuance of the State Farm policy. 

In light of the information that the fire was arson, State

Farm began investigating plaintiff’s personal and business

financial situation to determine if plaintiff’s finances would

provide plaintiff with a motive to commit arson. State Farm’s

investigation revealed that plaintiff operated a restaurant in

Coshocton, Ohio, and was in the process of constructing a new

restaurant in Sunbury, Ohio. State Farm also learned that

plaintiff owed the Internal Revenue Service approximately $391,000

in back taxes. Scott Hedges, State Farm’s claim administrator,

requested financial information from plaintiff’s counsel. Some of

that information was not provided, and in November of 2010, State

Farm retained Attorney Timothy Ryan to assist in obtaining

2

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 2 of 27 PAGEID #: <pageID>
plaintiff’s financial records. State Farm also authorized Ryan to

retain a forensic accountant to review plaintiff’s financial

records. Ryan corresponded with plaintiff’s counsel over a fourmonth period. Plaintiff persisted in his refusal to provide

certain records, including his tax returns, and continually

rescheduled the accountant’s review of his records. By letter

dated June 7, 2011, State Farm denied plaintiff’s claim and voided

his policy as of August 18, 2010, citing the intentional acts

clause and the concealment and fraud clause of the policy. 

Plaintiff filed the instant action on August 9, 2011, in the

Court of Common Pleas of Licking County, Ohio. A notice of removal

of the action to this court based on diversity of the parties was

filed on September 1, 2011. This matter is now before the court on

State Farm’s motion for summary judgment.

I. Summary Judgment Standards

“The court shall grant summary judgment if the movant shows

that there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.” Fed. R. Civ.

P. 56(a). The central issue is “whether the evidence presents a

sufficient disagreement to require submission to a jury or whether

it is so one-sided that one party must prevail as a matter of law.” 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). A

party asserting that a fact cannot be or is genuinely disputed must

support the assertion by citing to particular parts of materials in

the record, by showing that the materials cited do not establish

the absence or presence of a genuine dispute, or by demonstrating

that an adverse party cannot produce admissible evidence to support

the fact. Fed. R. Civ. P. 56(c)(1)(A) and (B). In considering a

3

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 3 of 27 PAGEID #: <pageID>
motion for summary judgment, this court must draw all reasonable

inferences and view all evidence in favor of the nonmoving party. 

See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.

574, 587 (1986); Am. Express Travel Related Servs. Co. v. Kentucky,

641 F.3d 685, 688 (6th Cir. 2011).

The moving party has the burden of proving the absence of a

genuine dispute and its entitlement to summary judgment as a matter

of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 

The moving party’s burden of showing the lack of a genuine dispute

can be discharged by showing that the nonmoving party has failed to

establish an essential element of his case, for which he bears the

ultimate burden of proof at trial. Id. Once the moving party

meets its initial burden, the nonmovant must set forth specific

facts showing that there is a genuine dispute for trial. Id. at

322 n. 3. “A dispute is ‘genuine’ only if based on evidence upon

which a reasonable jury could return a verdict in favor of the nonmoving party.” Niemi v. NHK Spring Co., Ltd., 543 F.3d 294, 298

(6th Cir. 2008). A fact is “material” only when it might affect

the outcome of the suit under the governing law. Id; Anderson, 477

U.S. at 248.

The nonmovant must “do more than simply show that there is

some metaphysical doubt as to the material facts[.]” Matsuchita,

475 U.S. at 586. A mere scintilla of evidence is not enough. 

Anderson, 477 U.S. at 252; Ciminillo v. Streicher, 434 F.3d 461,

464 (6th Cir. 2006). Further, the nonmoving party has an

affirmative duty to direct the court's attention to those specific

portions of the record upon which it seeks to rely to create a

genuine issue of material fact. See Fed. R. Civ. P.

4

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 4 of 27 PAGEID #: <pageID>
56(c)(3)(noting that the court “need consider only the cited

materials”).

II. Termination under Cooperation Clause

State Farm first argues that it was entitled to deny

plaintiff’s claim and terminate the policy due to plaintiff’s lack

of cooperation in its investigation of the fire. Because the

policy was issued in Ohio to an Ohio resident, its interpretation

is governed by Ohio law. Bank of N.Y. v. Janowick, 470 F.3d 264,

271 (6th Cir. 2006). A cooperation clause is frequently included

in an insurance policy to protect insurance companies against

fraudulent claims. Doerr v. Allstate Ins. Co., 121 Fed.Appx. 638, 

640 (6th Cir. 2005). Under Ohio law, an insured party has a duty

to comply with a cooperation clause. Id.; Luntz v. Stern, 135 Ohio

St. 225, 232, 20 N.E.2d 241 (1939)(an insured “is required to make

a fair and frank disclosure of information demanded by the company

to enable it to determine whether there is a genuine defense”).

When cooperation is a policy condition and an insured fails to

comply, the insurer may be relieved of further obligation on the

claim. Gabor v. State Farm Mut. Auto. Ins. Co., 66 Ohio App.3d

141, 143, 583 N.E.2d 1041 (1990). To constitute a defense to

liability, an insured’s lack of cooperation must result in material

and substantial prejudice to the insurance company. Id., 66 Ohio

App. at 144. Prejudice has been described as actions which

seriously impair the insurer’s ability to investigate a claim. 

Weller v. Farris, 125 Ohio App.3d 270, 276, 708 N.E.2d 271 (1998). 

Whether an insured has violated a cooperation clause is a question

to be determined in view of the facts and circumstances in each

case. Id. Although the issue of whether there has been a

5

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 5 of 27 PAGEID #: <pageID>
violation of an insurance policy provision is generally for the

factfinder, a court may decide the cooperation clause issue as a

matter of law when a case presents undisputed facts. Id. 

The policy issued to plaintiff included both a cooperation

clause and a clause which voided the policy in the event that the

loss was the result of an intentional act by the insured. The

declarations section of the policy issued to plaintiff stated: “We

agree to provide the insurance described in this policy ... based

on your compliance with all applicable provisions of this

policy[.]” Hodges Decl., Ex. 1. The policy further provided: “You

agree, by acceptance of this policy, that ... you will ... comply

with the provisions of the policy[.]” Hodges Decl., Ex. 1.

Under the heading SECTION I - CONDITIONS, the policy specified

the insured’s duties following a loss, which included:

d. as often as we reasonably require:

* * *

(2) provide us with records and documents we request and

permit us to make copies;

(3) submit to and subscribe, while not in the presence of

any other insured:

(a) statements; and

(b) examinations under oath[.]

Hedges Decl., Ex. 1, Section I, Para. 2(d).

Section I provided as an additional condition:

12. Intentional Acts. If you or any person insured under

this policy causes or procures a loss to property covered

under this policy for the purpose of obtaining insurance

benefits, then this policy is void and we will not pay

you or any other insured for this loss.

6

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 6 of 27 PAGEID #: <pageID>
Hedges Decl., Ex. 1, Section I, Para. 12. Under Paragraph 5 of the

heading SECTION I AND SECTION II - CONDITIONS, as modified under

the heading “AMENDATORY ENDORSEMENT (Ohio),” defendant “may cancel”

the policy “if evidence of arson exists.” Hedges Decl., Ex. 1,

Section I and Section II - Conditions and Amendatory Endorsement

(Ohio), Para. 5(b)(1)(c). In light of these provisions, arson

would be a defense to coverage, and therefore a matter reasonably

within the scope of State Farm’s investigatory authority under the

policy. 

State Farm’s investigation of the fire at the insured

residence revealed that the fire started in the basement of the

house, and that an accelerant was used to start the fire, thus

indicating arson. Hedges Decl., Paras. 7-8. Claim Administrator

Scott Hedges also learned during his recorded conversation with

plaintiff on August 24, 2010, see Hedges Decl., Ex. 3, that

plaintiff was attempting to open a restaurant in Sunbury, Ohio,

with attendant financial obligations, and that the Internal Revenue

Service had a lien against plaintiff in the amount of $391,000 for

unpaid taxes. Hedges Decl., Para. 9. Hedges concluded that this

information suggested that plaintiff might have a motive to commit

arson in order to collect the insurance proceeds on the residence. 

The liability limits specified in the policy were substantial:

$218,000 for the dwelling, $21,800 for an extension of the

dwelling, and $163,500 for personal property. Hedges Decl., Ex. 1. 

Plaintiff also informed Hedges on August 24, 2010, that he had

previously filed an insurance claim in 2006 for losses sustained in

an arson-related fire at his restaurant in Coshocton. 

On September 20, 2010, Hedges sent a letter to plaintiff’s

7

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 7 of 27 PAGEID #: <pageID>
counsel requesting that plaintiff provide personal and business

bank statements, cell phone statements from April 2010 through the

present, tax returns for 2007, 2008 and 2009, personal and business

loan statements from April 2010 through the present, and all

correspondence relating to his personal and business loans from

September 2009 through the present. Hedges Decl., Ex. 4. By

letter dated October 14, 2010, plaintiff’s counsel provided Hedges

with personal and business checking and savings account

information, credit card statements, cell phone records for

plaintiff’s phone (the account was registered in the name of Emily

Kobel, plaintiff’s former girlfriend) and an auto loan statement. 

Doc. 22, Ex. 2.

In a letter dated November 5, 2010, Timothy Ryan, retained as

counsel by State Farm, notified plaintiff’s counsel that State Farm

was requesting various business and financial records, including

income tax returns, documents reflecting income sources, monthly

expenses, and purchases over $1,000 for the preceding twelve

months, bank records, credit card statements, loans and past due

notices, and documents relating to any prior losses or damage to

property within the past five years. Hedges Decl., Ex. 5. By

letter to plaintiff’s counsel dated November 22, 2010, Ryan

acknowledged receipt of various bank statements, but indicated that

State Farm had not yet received certain mortgage statements,

correspondence regarding loans, or copies of plaintiff’s personal

tax returns. The letter also noted correspondence from plaintiff’s

accountant indicating that plaintiff’s corporate tax returns for

2007-2009 had not yet been finalized. Doc. 22, Ex. 3.

In a letter to plaintiff’s counsel dated December 30, 2010,

8

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 8 of 27 PAGEID #: <pageID>
Ryan noted that he was forwarding a transcript of plaintiff’s

examination conducted on December 10, 2010, and requested that

plaintiff make any necessary changes. Ryan also requested

documents related to the construction of plaintiff’s restaurant in

Sunbury, Ohio, including the original budget and business plan for

the project, a schedule of payments to contractors and a record of

any payments due to contractors, correspondence to and from

contractors, and documentation regarding capital contributions or

loans from investors. Hedges Decl., Ex. 6. Ryan wrote plaintiff’s

counsel on January 14, 2011, noting that the documents requested in

December had not yet been provided. Hedges Decl., Ex. 7.

On January 21, 2011, Ryan informed plaintiff’s counsel by

letter that State Farm had authorized the retention of a forensic

accountant at State Farm’s expense to conduct a review of

plaintiff’s records at a location of his choosing, thus relieving

plaintiff of the need to gather and copy documents. Ryan also

requested that the accountant have access to financial

documentation relating to the performance of the Coshocton

restaurant as well as the capitalization and construction of the

Sunbury restaurant. Ryan indicated that the accountant was

available on January 31, 2011, to conduct the review. Hedges

Decl., Ex. 8. The review of records originally scheduled for

January 31, 2011, did not go forward, and Ryan informed plaintiff’s

counsel on that date that the accountant would be available on

February 10, 2011. Ryan also requested that plaintiff make

available records for the Coshocton restaurant for the preceding

three years. Hedges Decl., Ex. 9.

In a letter to Ryan dated February 2, 2011, plaintiff’s

9

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 9 of 27 PAGEID #: <pageID>
counsel claimed that State Farm’s request to examine plaintiff’s

business records was unreasonable, alleging that the financial

records which had been provided demonstrated that plaintiff was

substantially current on all financial obligations with the

exception of one missed house payment, which plaintiff contended

was inadvertent. Counsel also contended that there was no evidence

that plaintiff intentionally caused the fire. He noted the report

of Scott Bennett of Fire Investigation Services dated November 7,

2010, which opined that the loss was the result of an intentional

act based on burn patterns, and that an unidentified ignitable

liquid was used to spread the fire. Counsel then stated that

plaintiff had reported that paint thinners and other ignitable

liquids were stored in various locations in the basement. Counsel

also requested any additional evidence of arson in State Farm’s

possession. Hedges Decl., Ex. 10.

By letter to plaintiff’s counsel dated February 4, 2011, Ryan

sought clarification of whether plaintiff was at that point

refusing to participate further in the investigation. Ryan noted

that the accountant’s analysis could go either way in determining

whether plaintiff had a financial motive to set the fire. Ryan

indicated that his review of plaintiff’s examination testimony had

raised as many questions as answers, and opined that it would be in

plaintiff’s best interest to have the forensic accountant look at

all of the records at one time and seek to reconcile the

examination testimony with the financial records. He reiterated

that the decision to utilize the services of an accountant was in

part based on counsel’s earlier comments that plaintiff was very

busy and had been unable to gather the previously requested

10

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 10 of 27 PAGEID #: <pageID>
information, such as balance sheets and other financial documents,

which had not been produced. Ryan requested that counsel contact

him by February 9, 2011, regarding when the accountant could be

given access to plaintiff’s records. Hedges Decl., Ex. 11.

Ryan wrote to plaintiff’s counsel again on February 10, 2011,

stating that State Farm’s investigation was ongoing due to evidence

of an incendiary fire and the absence of evidence to exclude

plaintiff as a possible participant in the cause of the fire. Ryan

noted a supplemental report from Bennett, wherein Bennett stated

that he spoke with plaintiff and his son, Zack, about the presence

of ignitable liquids in the home, and both plaintiff and his son

stated that they were unaware of the presence of ignitable liquids

in the residence, and that only cans of latex paint were there. In

addition, Bennett clarified that he found evidence of a pour

pattern in the area of origin. Ryan further stated in his letter

that plaintiff’s refusal to permit review of his financial records

could be considered a failure to cooperate in the claim

investigation, providing a basis for the denial of the claim. 

Hedges Decl., Ex. 12.

In a letter to plaintiff’s counsel dated February 15, 2011,

Ryan indicated that State Farm had authorized him to release the

cause and origin report. He asked counsel to provide him with a

date for review of plaintiff’s records by the forensic accountant,

and indicated that he would coordinate the review with the schedule

of plaintiff’s accountant if plaintiff wanted to have his own

accountant present during the review. Ryan further noted that he

had not yet received the Nationwide Insurance cancellation letter

terminating the homeowner’s policy on the residence, or, in the

11

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 11 of 27 PAGEID #: <pageID>
alternative, a signed release which would authorize Nationwide to

provide that information to State Farm. Hedges Decl., Ex. 13.

By letter to plaintiff’s counsel dated February 23, 2011, Ryan

referenced a telephone conversation with plaintiff’s counsel on

February 16, 2011, during which counsel indicated that he would be

asking plaintiff about his willingness to permit the forensic

accountant to review his records. Ryan gave plaintiff a deadline

of February 25, 2011, to decide whether to permit the review. Ryan

noted the history of his correspondence with counsel, and reminded

counsel that he had not yet received the Nationwide cancellation

letter or a signed authorization, a statement of errors for the

December examination transcript, or the records concerning the

Sunbury restaurant which he had previously requested. Hedges

Decl., Ex. 14.

Following a telephone call with counsel on February 28, 2011,

Ryan sent another letter providing possible dates for the

accountant’s review through March 10, 2011. Hedges Decl., Ex. 15. 

By letter to plaintiff’s counsel dated March 2, 2011, Ryan provided

counsel with a list of the documents the accountant wanted to

examine during his evaluation. Hedges Decl., Ex. 16. On March 7,

2011, Ryan again corresponded with plaintiff’s counsel, indicating

that March 10, 2011, was the only viable date remaining for the

accountant’s examination. He again noted plaintiff’s failure to

provide a signed authorization permitting State Farm to obtain the

policy information from Nationwide or the errata sheet for the

examination transcript. Hedges Decl., Ex. 17. On March 16, 2011,

Ryan wrote to plaintiff’s counsel to inform him that plaintiff’s

position that the accountant’s review could not take place until

12

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 12 of 27 PAGEID #: <pageID>
May 2, 2011, was unacceptable to State Farm. Hedges Decl., Ex. 18. 

By letter dated June 7, 2011, plaintiff was notified that his

policy was being voided. Hedges Decl., Ex. 19. There is no

evidence in the record that plaintiff made any effort to make his

records available to State Farm in the interim between Ryan’s

letter of March 16th and State Farm’s letter of June 7th. 

Plaintiff does not dispute this history of correspondence or

the accuracy of the information therein, nor does he deny that he

failed to provide requested documents. Rather, he argues that the

requested records were not relevant to State Farm’s investigation. 

However, where an insurance company raises arson as an affirmative

defense to liability, “there are strong public policy

considerations supporting the admission of evidence of the

insured’s financial position to show a possible motive for the

fire.” Gabor, 66 Ohio App.3d at 144-45. Where the insurer’s

investigation indicates that arson is a possible cause of fire

damage, the policyholder’s failure to provide the insurer with

pertinent financial information may void a policy for breach of the

cooperation clause. Id. at 145; see also Moore v. State Farm Fire

& Cas. Co., Nos. 9200, 9376 (2nd Dist. unreported), 1985 WL 62876

at *4 (Ohio App. Dec. 3, 1985)(an income tax return is per se

relevant in case where insurer raises arson as affirmative defense

to liability on insurance policy).

In Gabor, the court held that because the insured’s financial

condition is relevant to a determination of possible motive for

incendiarism, and because tax records create a picture of the

insured’s entire financial situation, the insured’s failure to

produce tax records constituted a substantial and material breach

13

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 13 of 27 PAGEID #: <pageID>
of his contractual duty to cooperate. Id. The court concluded

that this breach clearly prejudiced the insurer’s investigation

into possible motives for arson, and relieved the insurer of

further obligation with respect to the claim as a matter of law,

warranting summary judgment for the insurer. Id.

In Doerr, the Sixth Circuit disagreed with the insured’s

characterization of his financial records and income tax returns as

being irrelevant. The court noted that because the surrounding

circumstances indicated that the fire was intentionally set, the

insured’s financial condition at the time of the fire was relevant

to the investigation. Doerr, 121 Fed.Appx. at 641 (citing Templin

v. Grange Mut. Cas. Co., 81 Ohio App.3d 572, 576, 611 N.E.2d 944

(1992)(“Motive is relevant to the investigation of a suspicious

fire claim; an insured’s precarious financial position may

establish a motive for arson.”)) The court further stated that the

insured’s income tax forms and bank records were relevant

documentary evidence demonstrating his financial condition. Id.

The court affirmed the order granting summary judgment to the

insured, concluding that the insured’s failure to produce the

requested documents materially prejudiced the insurer’s arson

investigation as a matter of law. Id. at 641-42. See also Gaston

v. Allstate Ins. Co., No. 4:08 cv 0749 (unreported), 2008 WL

5716525 at *3-4 (N.D.Ohio July 31, 2008)(because insurer reasonably

suspected arson, insured’s failure to produce income tax returns

and bank records in violation of cooperation clause resulted in

material and substantial prejudice to insurer as a matter of law).

Plaintiff’s failure to provide the requested financial

documents resulted in a failure to satisfy a condition precedent to

14

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 14 of 27 PAGEID #: <pageID>
State Farm’s obligation to pay his claim. In Savage v. American

Family Ins. Co., 178 Ohio App.3d 154, 160, 897 N.E.2d 195 (2008),

the insureds questioned the need to provide their tax returns. The

court noted that under the cooperation clause in the policy,

providing relevant financial records was a condition of the

contract which had to occur, unless its non-occurrence was excused,

before performance under the policy became due. Id. The court

stated that the requested tax returns were relevant to assessing

the insureds’ financial condition and to clarify the discrepancy

between their bankruptcy schedule of personal property and property

allegedly in their possession at the time of burglary which led to

the claim. Id. The court held that the insurer was not obligated

to perform under the contract until the insureds had satisfied the

conditions precedent of providing tax returns and submitting to

examination under oath, and that since these conditions were not

satisfied, summary judgment for the insured was appropriate. Id.

at 160-61. 

State Farm had substantial evidence that the fire was the

result of an intentional act. Plaintiff stayed at a motel near the

house on the night before the fire, and later made inconsistent

statements to State Farm’s investigators. State Farm also had

information early in the investigation indicating that plaintiff

had significant financial obligations and a large tax liability. 

In light of these circumstances, State Farm’s efforts to

investigate plaintiff’s financial situation by seeking to examine

his financial records were warranted and reasonable, and no genuine

dispute has been shown to exist in that regard.

In light of plaintiff’s failure to make his financial records

15

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 15 of 27 PAGEID #: <pageID>
available for inspection, the cooperation clause, a condition

precedent, was not satisfied. The fire occurred on August 18,

2010. From mid-September, 2010, through mid-March, 2011, a sixmonth period, State Farm unsuccessfully made repeated attempts to

make arrangements for its accountant to review plaintiff’s

financial records, and attempted to accommodate plaintiff’s busy

schedule. Although plaintiff claimed that he could make his

records available on May 2, 2011, there is no evidence that he made

any further efforts to tender his records between Ryan’s letter of

March 16, 2011, and State Farm’s letter of June 7, 2011, which

voided the policy roughly ten months after the fire. Plaintiff

cites no authority which would require State Farm to keep its

investigation open indefinitely in the hopes that plaintiff would

eventually cooperate. Compare Moore, 1985 WL 62876 at *1, 4

(finding a substantial and material breach of policy’s cooperation

clause where plaintiffs failed to produce tax returns in the ninemonth period between the fire and the filing of plaintiffs’

action). This court concludes that there is no genuine dispute

that plaintiff’s failure to permit inspection of his financial

records resulted in substantial and material prejudice to State

Farm, violated the cooperation clause, and warranted State Farm’s

denial of the claim and cancellation of the policy.

III. Concealment and Fraud Clause

State Farm further argues that it is entitled to summary

judgment due to misrepresentations made by plaintiff during the

investigation, which rendered the policy void under the concealment

and fraud clause. Under the heading SECTION I AND SECTION II -

CONDITIONS, the policy stated:

16

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 16 of 27 PAGEID #: <pageID>
2. Concealment or Fraud. This policy is void as to you

and any other insured, if you or any other insured under

this policy has intentionally concealed or misrepresented

any material fact or circumstance relating to this

insurance, whether before or after a loss.

Hedges Decl., Ex. 1, Section I and Section II - Conditions, Para.

2.

Ohio law recognizes the enforceability of conditions within

insurance policies for obtaining coverage, including conditions

excluding losses for concealing or misrepresenting material facts

or circumstances. See Gearing v. Nationwide Ins. Co., 76 Ohio

St.3d 34, 665 N.E.2d 1115, 1117 (1996). A misrepresentation is

considered material if a reasonable insurance company, in

determining its course of action, would attach importance to the

fact misrepresented. Abon, Ltd. v. Transcontinental Ins. Co., No.

2004-CA-29 (5th Dist. unreported), 2005 WL 1414486 at *13 (Ohio

App. June 16, 2005). The materiality of a misrepresentation is a

mixed question of law and fact. Id. The subject of the

misrepresentation need not ultimately prove to be significant to

the disposition of the claim, so long as it was reasonably relevant

to the insurer’s investigation at the time. Id. A false sworn

answer is material if it is calculated either to discourage,

mislead or deflect the insurer’s investigation in any area that

might seem to the insurer, at that time, a relevant or productive

area to investigate. Rose v. State Farm Fire & Cas. Co., No. 2:10-

cv-874 (unreported), 2010 WL 3583248 at *8 (S.D.Ohio Aug. 20,

2012). 

State Farm alleges that plaintiff attempted to mislead its

investigator concerning his whereabouts at the time of the fire. 

State Farm has presented evidence that on August 19, 2010,

17

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 17 of 27 PAGEID #: <pageID>
plaintiff was interviewed by Claim Administrator Scott Hedges and

defendant’s investigator, Greg Gilkey. According to Hedges,

plaintiff stated that he was in Coshocton, Ohio, on the night of

August 17, 2010, and the morning of August 18, 2010, when the fire

occurred. Hedges Decl., Paras. 11-12. However, during the August

24, 2010, interview, plaintiff informed Hedges that he had checked

into a Days Inn motel the night before the fire. Ex. 3, pp. 11,

13. He stated that he was embarrassed about the fact that he

stayed at a hotel with the hope of having a sexual encounter. Ex.

3, p. 66. During the examination on December 10, 2010, plaintiff

denied that he told Gilkey that he was in Coshocton, and stated

that he failed to inform Gilkey that he had spent the night before

the fire at the Days Inn because he was embarrassed about his plans

to meet with a female friend at the motel. Doc. 22, pp. 147-148. 

The court concludes that a genuine dispute exists as to whether

plaintiff’s statements were calculated to discourage, mislead or

deflect State Farm’s investigation. 

State Farm has also presented evidence that plaintiff gave

Hedges false information concerning his cell phone coverage. 

During the August 24, 2010, interview, plaintiff was asked about

phone calls he received while at the Days Inn. Plaintiff stated

that his cell phone was on his son’s plan because he got a discount

working at Kroger. Ex. 3, pp. 13, 63. On or about October 14,

2010, plaintiff’s counsel provided plaintiff’s cell phone records

to Hedges, which described the account as being maintained by

plaintiff’s former girlfriend, Emily Kobel. Doc. 22-2. This

court concludes that the issue of whether the above information

constituted a material misrepresentation is one for the trier of

18

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 18 of 27 PAGEID #: <pageID>
fact.

State Farm has also presented evidence that plaintiff

initially concealed the fact that he had made an insurance claim in

2006 for the fire loss of personal property located in his

apartment above his Coshocton restaurant. When asked about

previous insurance claims during the interview on August 24, 2010,

plaintiff stated that he had filed a claim with Ohio Mutual for

losses to business property at his Coshocton restaurant following

an arson fire in 2006. Hedges Decl., Ex. 3, p. 30. He also

discussed other claims he filed in the 1990's regarding three theft

losses and damage to the residence from a fallen tree. Hedges

Decl., Ex. 3, p. 39. He did not reveal during this interview that

he also made a claim to Nationwide Insurance in 2006 for fire

damage to personal property which was located in his apartment

above the restaurant. Hedges Decl., Para. 14. However, he was

never specifically asked if the claims he identified during the

August 24th interview were the only claims he had made. In a later

examination on December 10, 2010, plaintiff acknowledged that he

had submitted a claim to Nationwide Insurance for the contents of

his apartment. Doc. 22, p. 9. The issue of whether plaintiff’s

conduct was calculated either to discourage, mislead or deflect

State Farm’s investigation presents a jury question in this case.

The court concludes that State Farm is not entitled to summary

judgment based on the alleged violations of the concealment and

fraud clause. 

IV. Misrepresentations on Application as Warranties

State Farm further argues that it was justified in voiding the

policy due to misstatements made by plaintiff on the policy

19

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 19 of 27 PAGEID #: <pageID>
application. Under Ohio law, if a misstatement of fact is a

warranty, the misstatement voids the policy ab initio, whereas if

the misstatement is a representation, the misstatement renders the

policy voidable. Allstate Ins. Co. v. Boggs, 27 Ohio St.2d 216,

218-19, 271 N.E.2d 855 (1971). A warranty is a statement by the

insured of a material fact either appearing on the face of the

policy or in another instrument specifically incorporated in the

policy. Id., 27 Ohio St.2d at 219. A misstatement by an insured

renders a policy void ab initio if the misstatement plainly appears

as a warranty on the face of the policy or is plainly incorporated

into the policy as a warranty, and the policy unambiguously

provides that a misstatement as to the warranty will render the

policy void from its inception. Id.

The declarations section of the State Farm policy in this case 

stated: “We agree to provide the insurance described in this policy

... in reliance on your statements in these Declarations.” Hedges

Decl., Ex. 1. The policy further provided:

You agree, by acceptance of this policy, that:

* * *

2. the statements in these Declarations are your

statements and are true;

3. we insure you on the basis your statements are true; 

* * *

Unless otherwise indicated in the application, you state

that during the three years preceding the time of your

application for this insurance our Loss History and

Insurance History are as follows:

1. Loss History: you have not had any losses, insured or

not; and

2. Insurance History: you have not had any insurer or

20

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 20 of 27 PAGEID #: <pageID>
agency cancel or refuse to issue or renew similar

insurance to you or any household member.

Hedges Decl., Ex. 1.

The policy also contained another AMENDATORY ENDORSEMENT which

added the following language to the policy declarations:

You agree, by acceptance of this policy, that:

1. any application for the insurance provided by this

policy, including any warranty made by you, is a part of

this policy; and

2. all statements in the application for insurance and in

the Declarations are warranties.

This policy is void from its inception, if any warranty

made by you is found to be false.

Hedges Decl., Ex. 1, Amendatory Endorsement.

The State Farm policy specifically includes within the

declarations section the statements made on the application

concerning loss history and coverage history, and also expressly

incorporates all statements made in the application into the policy

as warranties. The policy specifically states that the policy is

void from its inception if any warranty is found to be false. 

Thus, the policy complies with the requirements announced in Boggs.

State Farm has produced evidence that plaintiff made material

misrepresentations in applying for the policy. In her affidavit,

Christi Weiss, a licensed agent in the office of Joni Stanton, a

State Farm agent, stated that she took the application for a

homeowner’s policy from plaintiff on March 5, 2009. Doc. 20, Ex.

B. In response to the question “Has applicant had any losses,

insured or not, in the past 5 years?”, plaintiff answered “No.” 

Weiss Aff., Para. 4. In response to the question “Has any insurer

21

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 21 of 27 PAGEID #: <pageID>
or agency canceled or refused to issue or renew similar insurance

to the named applicant or any household member within the past 3

years?”, plaintiff answered “No.” Weiss Aff., Para. 5. According

to the affidavit of Joseph Montes, Personal Lines Underwriting Team

Manager for State Farm, plaintiff also represented in the

application that he was the “owner” of the property to be insured

under the policy. Doc. 20, Ex. C, Para. 5.

During the examination on December 10, 2010, plaintiff

admitted that he had submitted a claim to Nationwide Insurance for

the contents of his apartment above the restaurant following the

fire there on July 10, 2006, within three years of the application. 

Doc. 22, p. 9. Plaintiff acknowledged that he had sustained

losses, and did not deny giving a negative answer to the question

on the application about prior losses; rather, he stated only that

he did not recall being asked that question when applying for the

policy. Doc. 22, pp. 21-26.

During the December 10, 2010, examination, plaintiff also

stated that he had a Nationwide homeowner’s policy on the residence

prior to his acquisition of the State Farm policy. Doc. 22, p. 16. 

Plaintiff said that Nationwide had sent him a notice of

cancellation, which indicated that the policy would be cancelled in

thirty days if plaintiff did not complete certain repairs to the

house. Plaintiff stated he did not recall the exact date of the

cancellation. Doc. 22, p. 17, 20. Plaintiff also stated that he

did not recall being asked about the cancellation of any other

insurance policies in making the application, but claimed that if

he had been asked that question, he would have said “Yes.” Doc.

22, p. 20. In his later deposition of November 1, 2012, plaintiff

22

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 22 of 27 PAGEID #: <pageID>
again stated that he could not recall the effective date of the

cancellation of the Nationwide policy, but that it was right around

the effective date of the State Farm policy. After receiving the

cancellation notice from Nationwide, he saw the State Farm office

sign and called them. Doc. 24, pp. 106-109. When asked if he told

State Farm’s agent that the Nationwide policy had been cancelled,

he stated “I believe I did.” Doc. 24, p. 109. 

In his interview with Hedges on August 24, 2010, plaintiff

stated that his divorce from his ex-wife was final in 2007, and

that the insured residence was deeded in her name only. Hedges

Decl., Ex. 3, pp. 4, 40. During a later examination of plaintiff

on December 10, 2010, plaintiff was asked about the ownership of

the residence. He stated that the residence was deeded in his exwife’s name prior to their divorce in 2007. Doc. 22, pp. 89-92.

Uncontroverted evidence establishes that plaintiff knew in

2009, when he completed the insurance application for State Farm’s

homeowner’s policy, that he was not the owner of the residence. 

Plaintiff has also pointed to no evidence sufficient to create a

genuine dispute as to whether he responded “No” to the question of

prior losses. However, even assuming that plaintiff’s testimony

concerning that issue and whether he responded “No” to the question

about policy cancellations would ordinarily be sufficient to create

a factual issue on that point, that does not get plaintiff over the

hurdle presented by the declarations section of the policy. The

declarations section stated that by accepting the policy, plaintiff

agreed that his statements in the declarations section were his

statements and were true. Included in the declarations section was

the language “you state that during the three years preceding the

23

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 23 of 27 PAGEID #: <pageID>
time of your application for this insurance ... you have not had

any losses, insured or not; and ... you have not had any insurer or

agency cancel ... similar insurance[.]” Hedges Decl., Ex. 1,

Declarations. Plaintiff accepted the policy, and there is no

evidence that he ever objected to this language in the declarations

section. He cannot now deny that these statements in the policy

were his. See Jaber v. Prudential Ins. Co. of Am., 113 Ohio App.3d

507, 512, 681 N.E.2d 478 (1996)(where policy contained language

that insured, by accepting policy, agreed that statements on

application were true, reasonable minds could only conclude that

misstatements on application voided policy ab initio).

State Farm has also presented evidence that the questions on

the application at issue involved information material to State

Farm’s decision to issue the policy. Weiss stated in her affidavit

that if plaintiff had informed her about his arson fire in 2006 and

that his policy with Nationwide was cancelled or in the process of

being cancelled, she would not have submitted the application to

State Farm. Weiss Aff., Paras. 7-8. Montes stated that if

plaintiff had informed State Farm about the fire in 2006 and the

fact that he did not own the property and that Nationwide had

cancelled his previous homeowner’s policy, plaintiff would have

been rated as an undesirable risk. Plaintiff would not have been

issued a homeowner’s policy and would only have been eligible for

a renter’s insurance policy which would not have covered the

structure of the house. Montes further stated that even in the

unlikely event that a homeowner’s policy was issued, at a minimum,

plaintiff would have been required to pay higher premiums and agree

to a higher deductible. Montes Aff., Paras. 6-9.

24

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 24 of 27 PAGEID #: <pageID>
Plaintiff argues that State Farm should bear the risk of there

being false statements on the insurance application. He contends

that State Farm should have verified whether plaintiff owned the

house by checking with the county recorder’s office, and that State

Farm should have investigated whether plaintiff had prior losses or

cancelled policies. However, plaintiff cites no authority which

imposes a duty on the insurer to independently investigate whether

the statements on an insurance application are correct prior to

issuing the policy, and it is doubtful that Ohio courts would do

so. Cf. Luntz, 135 Ohio St. at 231 (noting in context of failure

to assist in defense that policy was violated and rights under

policy were forfeited “notwithstanding the insurance company could

otherwise have protected itself.”) Such a rule would undoubtedly

prolong the application process while leaving applicants without

needed insurance coverage. The court also notes that State Farm

did attempt to investigate the date of Nationwide’s cancellation of

plaintiff’s previous policy, but was unsuccessful because

Nationwide refused to provide that information without a suitable

release, which plaintiff refused to sign.

The court concludes that the policy was void ab initio due to

misrepresentations on the insurance application which were

designated as warranties in the policy, and that no genuine dispute

has been shown to exist in that regard. 

IV. Bad Faith Claim

Plaintiff alleged in his complaint that State Farm violated

its duty of good faith and fair dealing in refusing to pay his

claim. Plaintiff’s memorandum contra does not address State Farm’s

motion for summary judgment on this claim.

25

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 25 of 27 PAGEID #: <pageID>
 A cause of action in tort under Ohio law arises when an

insurer breaches its duty to the insured to act in good faith. 

Staff Builders, Inc. v. Armstrong, 37 Ohio St.3d 298, 302-303, 525

N.E.2d 783 (1988). The mere refusal to pay insurance is not

sufficient in itself to establish bad faith. Helmick v. RepublicFranklin Ins. Co., 39 Ohio St.3d 71, 76, 529 N.E.2d 464 (1988). 

The crucial inquiry is whether “the decision to deny benefits was

arbitrary or capricious, and there existed a reasonable

justification for the denial,” not whether the insurance company’s

decision to deny benefits was correct. Thomas v. Allstate Ins.

Co., 974 F.2d 706, 711 (6th Cir. 1992)(applying Ohio law); see also

Hoskins v. Aetna Life Ins. Co., 6 Ohio St.3d 272, 276-77, 452

N.E.2d 1315 (1983).

To prevail on a bad faith claim, the insured must establish

that the insurer’s refusal to pay the claim is not predicated upon

circumstances that furnish reasonable justification therefor. 

Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552, syllabus, 644

N.E.2d 397 (1994). Courts look to whether “the claim was fairly

debatable and the refusal was premised on either the status of the

law at the time of the denial or the facts that gave rise to the

claim.” Tokles & Son, Inc. v. Midwestern Indemn. Co., 65 Ohio

St.3d 621, 605 N.E.2d 936, 943 (1992).

When the denial of benefits was legally correct under the

terms of the applicable insurance policy, it cannot be found that

the insurer’s denial of benefits was arbitrary or capricious, or

that a reasonable justification for the denial did not exist. 

Rose, 2012 WL 3583248 at *11; Goodgame v. State Farm Fire and Cas.

Co., No. 1:09-CV-00920 (unreported), 2010 WL 816497 at *3 (N.D.Ohio

26

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 26 of 27 PAGEID #: <pageID>
March 4, 2010)(insurer entitled to summary judgment on bad faith

claim where denial of claim was justified due to insured’s material

breach of obligation to cooperate with insurer’s investigation);

Gaston, 2008 WL 5716525 at *5 (where insurer was justified in

denying claim because of plaintiff’s material breach of the

cooperation clause in policy, insurer was entitled to summary

judgment on bad faith claim).

In light of the misrepresentations made on the policy

application and during the course of the claim investigation and

plaintiff’s failure to cooperate with the investigation, State Farm

was justified in voiding the policy and denying the claim, and the

denial of benefits was not arbitrary and capricious. Because State

Farm is entitled to summary judgment on plaintiff’s breach of

contract claim in light of plaintiff’s breach of the cooperation

and misrepresentation clauses warrants, State Farm is also entitled

to summary judgment on the bad faith claim.

V. Conclusion

For the reasons stated above, State Farm is entitled to

summary judgment. The motion for summary judgment (Doc. 20) is

granted. The clerk is instructed to enter judgment in favor of

State Farm on plaintiff’s claims.

Date: February 22, 2013 s/James L. Graham 

 James L. Graham

 United States District Judge 

27

Case: 2:11-cv-00794-JLG-NMK Doc #: 34 Filed: 02/22/13 Page: 27 of 27 PAGEID #: <pageID>